Optimal number of futures contracts in a cross hedge
If the futures contract moves in lockstep with the spot price of the asset being hedged, the hedge ratio is 1.0; e.g., to hedge 1 million gallons of jet fuel, we might take a long position in 24 heating oil futures contracts: 1 mm / 42,000 gallons per contract = about 24. But jet fuel is not heating oil, so we are cross-hedging.
Channel: Education
Uploaded: December 31, 1969 at 6:59 pm
Author: bionicturtledotcom
Length: 08:21
Rating: 5.00
Views: 1007
Tags: commodity derivatives Finance hedge
Video Comments
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jpaizc (December 31, 1969 at 6:59 pm)
Can I use the real prices or I must put the changes??? Or it}s no the same
ssrrapper (December 31, 1969 at 6:59 pm)
Very informative. Thank you for posting it! |
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